C.S. 166
CONFIDENTIAL #
XCC(77)87
Copy No.3.3.. of 40 Page 11
Development fund
24
The extent to which the company intends to rely on consumers for revenue financing is only $237m between 1978 and 1983, which is about 0.5 cents per unit. This is not considered unreasonable.
Public relations implications
25
There will be two clear years in which to prepare the public for the large annual tariff increases starting with the 2 cent rise in 1980 and going on to the further rises of 2 cents, 1 cent and then 2 cents in 1983. This will involve an explanation of:
(a)
the need for CLP to expand its capacity; and
(b)
the cost of expansion to meet demand.
This should be followed by a statement of the rationale for the parts that CLP shareholders and consumers alike should play in financing the expansion. Attention should also be drawn to the fact that consumers are not being called upon to contribute towards any capital financing, but will effectively only pay for the actual cost of electricity during the period under review, a cost which is increasing because of inflation. Thereafter the salient points of the Scheme of Control should be outlined to emphasise the restraints on the return applied to the Company and the benefits accruing to consumers from the interest on the Development Fund. Lastly, much attention should be devoted to the theme that the form of financing proposed will be the form which actually strikes a balance between financing the expansion as cheaply as possible and keeping the annual tariff increases within reasonable bounds.
26
By exposing the problem to the public in detail, by assuring them that the Government will monitor the implications for tariffs carefully and, if necessary, by informing the public that CLP are sympathetically inclined towards representation of consumer interests by Government members on the CLP Board when, but not before, consumer financing has reached a significant level, it should be possible to reduce the emotive effects that tariff increases have had in the past.
Advice sought
27
Honourable Members will be asked to advise whether CLP's financial plan, at Annex, is acceptable subject to CLP
CONFIDENTIAL
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